What is a New Product Development Process?

A New Product Development Process refers to the entire range of activities where a company
conceptualizes and realizes a new offering, often based on emerging market trends. A product
concept might originate in the marketplace, a lab, a workspace, or the fuzzy front end. Ideas
come from customer requirements, too. A flawless process allows teams to innovate and quickly
release differentiated products rapidly.

New product development usually follows a process divided into stages, phases, or steps, by
which a company conceives a new product idea and then completes market research, plans,
designs, prototypes, and tests it before launching it into the market. Below we will discuss the
phases of new product development, some product development examples (for more examples,
see our product development strategy page), and concept development strategies.

The product development process is the specific series of steps or stages a company uses to
realize new offerings to satisfy a market need. While nearly every company develops new
products or services, product development techniques differ substantially from one company to
another depending on the industry, the product type, potential customers, and whether the
products are incremental improvements or breakthrough innovations. This is probably the most
impactful form of process management that a company can undertake besides managing the
product life cycle and the product offering itself.

In many cases, since organizations rarely focus on it, a product management

An accepted approach for more than three decades puts a new product idea through a process
that defines the stages of the new product process (or through the product development life
cycle.) These steps culminate in an up-or-down decision the Senior Management team makes in
a formal review (often called a “gate”) at the end of each phase. At the end of the product
development stage is often a commercialization stage (physical products) or a QA stage
(software).

Note this assumes that you have a staged development process and are not following the agile
project management methodology. However, if you want to combine the best of both worlds
(Waterfall and Agile), you may be looking for a hybrid approach. If you want to know more about
how you may combine the best of Agile and Waterfall methods, check out Agile Product
Development.

Product Development Process – 6 Development Steps

 Products Late and Don’t Meet Expectations?

 Step 1: Idea Generation (Ideation)

1. Idea Generation (Ideation)

This first step or stage of the Product Development process, often called “Ideation,” is where new
product concepts originate. Usually, this step results from an idea screening to select the next
product effort and is more clearly defined in new product development. Following best practices,
businesses form a small team to explore the product roadmap and perform…

 Idea generation
 The initial definition of the product concept
 Business analysis (including SWOT analysis)
 Market research
 Technical and market risk
The idea stage is often the most crucial step for brainstorming new products because it is where
most product ideas come from. Sometimes, this first step uses a SWOT analysis (strengths,
weaknesses, opportunities, and threats) to prioritize ideas.

From Idea to Concept to Minimum Viable Product (MVP)

Often, product development starts with a product manager realizing that the sales are lagging
behind their forecasts because it is late in the product life cycle. The manager wants to act, but
sometimes they lack a methodology. Other times, the motivation is that someone in engineering
(or sales) comes up with a new idea out of the blue, not driven by the product development cycle
(not all products come from product managers!), but because of some independent
brainstorming. Finally, it can come from a deliberate marketing strategy and product roadmap.

It is the early stages of the new product development process where you can get the most
significant source of competitive advantage because, at these early product development stages,
you have greater flexibility with the product concept. The idea is not yet frozen. Depending on
the newness of the product idea, it is sometimes unclear if the process will realize the finer points
of the product development strategy. However, the product team can gain more confidence in
product-market fit by critically analyzing the product concept early in the NPD process and
thoroughly understanding the end-user requirement.
Suppose you still have concerns about product-market fit or product requirements. In that case,
you may clarify the product definition (alongside the marketing team) by talking to target market
members to understand the existing customer problem (independent of your solution) and pick
up a competitive analysis. The so-called “Solution-free” requirements gathering is one of the
most important ways to get at hidden needs and avoid solution locks. Also, external sources such
as consultants, analysts, researchers, dealers, and distributors can help you access potential
customer’s requirements as part of your normal NPD process and augment the voice of the
customer.

In a new product development project, because of the novelty of the new idea, you need to make
sure your product ideas address the needs of your target audience. This is usually the role of the
product manager, but they can include other team members in some scenarios, like customer
visits. Market testing during the early stages of product development focuses the team on
addressing gaps that can be discovered and fixed early before a successful product launch. This
allows the team to iterate quickly with little impact on the timeline.

By doing this early target market testing, you will validate your marketing strategy and the value
proposition simultaneously, raising the cross-functional team’s confidence as they confirm the
critical success factors for the new product. As the saying goes: “If you have time to do it a second
time, why not do it right the first time.”

This extra care at the beginning of your product development will pay dividends downstream.
This early work can help you create a value proposition chart and start product messaging
activities.

Product Management and Idea Screening Stage

One of the critical responsibilities of a product manager is to screen ideas so the product
development department does not waste time pursuing product concepts that fail. Many factors
go into idea screening: customer feedback, social media monitoring, and fit to strategy and
distribution/customer set. When you are refining existing products or are in a prototyping phase,
the product manager can get more specific and directive feedback for the product development
department because these are more tangible.

In all cases, product managers must turn a product idea into a concept. Once you have a concept
firmly in mind, you can think about concept development and testing with prospective customers
to ensure you are on the right course (this is especially true when you have come up with an
entirely new idea or new market). If the concept is super simple, you could even go directly to a
Minimum Viable Product (MVP) and start getting honest feedback.

Getting the product concept wrong at this early stage wastes time and increases opportunity
costs. Not all new product ideas come from the inside – the Corporate Development organization
and executives should constantly scan for new product ideas. Marketing efforts should also
include active competitive analysis and market scanning. Engineering should be brainstorming,
too.
At this stage, the target market, target audience (including Personas), and target customers are
proposed, and the initial marketing strategy is worked out. If the product goes through
distribution, the distributors are included as customers in this ideation step. Idea screening is
performed in this phase.

2. Product Definition (Discovery)

Sometimes called “scoping” or concept development, this step involves refining the definition of
the product concept and ensuring that the team understands customer requirements. In a
startup, this step is often called Discovery. The design team is assembled in this phase. The team
creates the first detailed assessment of the new product concept’s technical, market, and
business aspects and determines core functionality. A template or approach for design thinking
might help get started.

Sometimes, mockups are used to obtain early feedback on market fit. These mockups can be
primitive; for example, paper prototypes are commonly used to get early feedback from test
marketing. If this is an incremental product, then concept design can begin. For breakthrough
products, the team may consider simulations to get user feedback. The newer the product
category is to the company, the more concept testing is required. The fundamental goal
of product discovery techniques is to ensure that the ideas are good and will satisfy customers.

Concept design often begins in this phase. The design team can start to visualize the end product
and communicate this to potential customers (in software, this is simpler than in a complex
system or hardware product). The concept of Minimal Viable Product (MVP) can be an
advantageous way to strip the product to its core to ready it for external demos to customers –
this is especially true for software development where it is possible to create skins that make
early products look pretty polished.

Marketing Strategy Development

Developers and managers explore and define the critical points of differentiation for the new
product, incorporating market segmentation to ensure its alignment with target customer
segments’ specific needs and preferences. If done improperly, This step in development can
increase time to market or cause the product to misunderstand the market’s needs. Because this
step is often before really ramping up the team, aligning with the product development strategy
is also very important. Although it is early, metrics such as ARR (Annual Recurring Revenue) or
acquisition costs are often estimated. Clearly, a product roadmap can be instrumental in guiding
(or developing with) the marketing strategy.

In developing new products, including new business ideas (new to the company or the world),
you have to manage how this offering fits with the current marketing mix unless your focus is an
entirely new market without your other products in distribution. This should be done early in the
six or seven stages of typical product development efforts (we favor fewer numbers than seven
stages to increase speed) – and only done if it fits your market strategy.
Business Analysis

After the first stage of development, business analysis is performed. The team would look at
similar products, perform a competitive analysis, and begin to map out the distribution strategy,
including e-commerce. This ensures the margins returned to the firm will meet thresholds. The
market strategy will also guide the estimates of advertising and PR, which again weigh into the
ROI calculation for the new product. A three-year Profit and Loss plan is often part of the business
analysis.

Development Costs

As part of the business analysis, and with an understanding of the product definition, the team
can develop estimates of development costs at this stage of the development cycle. This cost also
goes into the business analysis to calculate ROI or IRR metrics.

New product development refers to bringing product innovations to the market instead of
product refinements or product derivatives. In all successful companies, product strategy
includes a portion of the overall spending on pure product innovation while the remainder of the
budget goes toward existing solutions. For example, a development framework would specify a
20%/80% split where the new product portion gets 20% or more of the funding. This can be much
larger in early-stage companies, including those led by entrepreneurs.

3. Prototyping

In this prototyping phase in the product development process, the team justifies the company’s
investment in product development by requiring the team to create a detailed business plan.
Best practices usually involve intensive market research and a transparent project management
approach. The team thoroughly explores the competitive landscape for the new product and
where the proposed product fits within it while also creating a financial model for the latest
offering that makes assumptions about market share. Besides concept testing, pricing strategy is
determined in this step.

For tangible new products, such as hardware or mixed systems, the team also considers the
manufacturability of the proposed new product, including the sourcing of the product if
outsourced. If manufacturing is a focus, you should ensure a New Product Introduction. By the
end of this phase, Senior Management should have a clear idea of what they’re investing in and
how it will perform in the marketplace.

This third step in the product development process (the prototyping phase) is critical because it
reduces the market risk for the new product. This is the stage where you can perform test
marketing because of the existence of prototypes that you can show to customers and get initial
feedback from focus groups. Software development can do these tests earlier because of the
relative ease of creating realistic user interfaces. In this stage, the initial design work would show
technical feasibility.
4. Detailed Design

In this phase, the focus is on product design and refinement of the prototype. In most cases,
teams alpha-test the prototype, iteratively working with customers, getting their feedback, and
incorporating it into the prototype. In parallel, marketing, sales, and manufacturing create the
launch and manufacturing platforms to support the emerging product. This fourth step in the
product development process is sometimes called development and sometimes incorporates the
next step, “Validation/Testing.”

5. Validation and Testing

Validation and testing means ensuring the prototype works as planned. It also means validating
the product in the eyes of the customers and markets while testing the viability of the financial
model for the product. The finished product may be available for initial feedback from paying
customers at this stage.

Everything in the business case learned from customers during the Development phase comes
under scrutiny and is tested as much as possible in “real world” conditions. The marketing
strategy is also confirmed at this point. If anything in the business case or prototype needs
revising, this is the team’s last chance to do so. This is the last step before the final product is
ready for the market. Test marketing, or beta testing (depending on the type of product), is often
performed at this stage to help validate the go-to-market plan.

6. Commercialization

During this step of the product development process (including the manufacturing process), the
team realizes everything required to bring the final product to market, including product
marketing and sales plans (or sales training if necessary) for the market introduction.

Product Launch

The finished product will be built (or released in the case of software) and be able to be sold after
final testing. The team, including project management, begins operationalizing the manufacture
and customer support for the product and supports the product introduction. That is why this
step is called the Commercialization Phase. Test marketing may continue to give the company
the most tremendous success with the launch.